Don’t fall for misleading annuity advertisements
With stock markets soaring to new heights at the same time social and economic chaos dominates the news, annuity promoters are once again aggressively running ads that target your retirement fears … and your money.
There’s not much regulation and oversight when it comes to annuity advertising, so you need to turn on your common sense filters when you hear or see these media sales pitches.
Anything goes with indexed-annuity ads
Indexed annuities are not classified as a security, which means that the sales message is not regulated by the SEC and FINRA. Instead, oversight is delegated to state insurance departments to corral the annuity advertising cowboys. Let’s just say that’s not going so well, and the industry seems to be purposely ignoring these ads in order to not interrupt the premium inflow.
Most indexed-annuity ads are run on national TV, radio, and on the Internet, which means that the sales messages goes pretty much unregulated by the states. Made up and misleading descriptions like “hybrid,” “market lock” and “market upside with no downside” proliferate the airways unchecked. If indexed annuities were categorized as a security, these “too good to be true” ads would end immediately, and the perpetrators would lose their licenses. That’s an advertising fact, and all you really need to know about this ongoing hype.
Indexed-annuity ads to agents are even worse
Annuity ads to the public are tame when compared to the over-the-top-nonsense product promotions directed at annuity agents. That is an understatement to say the least, and the genesis of most bad indexed-annuity sales practices.
In the indexed-annuity world, the product is primarily distributed through middle-man sales organizations that take a cut of everything sold by their contracted army of agents. It’s a sales free for all, and the agent-recruiting practices would shock and embarrass most big-time college football and basketball recruiters. This no-holds-barred sales environment with the recruitment of agents continues to be a major industry problem.
“I hate all annuities” ads are misleading as well
Prominent money managers spend tons of advertising dollars trying to convince the public that all annuities are bad. Down deep they factually know better, and are aware that all annuity types cannot be put into one category.
The game here is to “convert” that large annuity you have into their managed-money platform. From one lifetime annual fee to another, I guess. In their defense, I do believe that most variable- and indexed-annuity owners are better off in a managed-money environment if their goal is real market growth.
Never take annuity advice from a celebrity
Radio talk show hosts, political consultants, motivational speakers, and former TV personalities are all taking their shot (and collecting their fees) to promote the next best indexed annuity.
This is the prime example of marketing to the lowest common denominator because for the life of me, I can’t believe that this type of financial product endorsement actually works. It must be effective because it continues to happen, so I’m on the lookout for the “Kardashian indexed annuity” ad in the near future.
You are smarter than that
Annuities are contracts. That fact applies to every single type of annuity. Your gut instinct knows better than to believe the overhyped annuity ads, but your hope (and sometimes greed) wants to believe that the sales pitch is true. You are smarter than to fall for that … right?
If the phenomenal-sounding indexed-annuity ads were actually true, then the country’s problems would be over. Janet Yellen would have the answer she has been looking for. As we all know, the contractual realities of an annuity policy always and eventually overrides the advertised sales hype.
So the next time you are bombarded by that enticing annuity ad, don’t fall for the sales sizzle. Focus only on the contractual steak.
Originally published 8.18.15 by MarketWatch.com – http://www.marketwatch.com/story/dont-fall-for-misleading-annuity-advertisements-2015-08-18